Commercial real estate will take the markets lower - the news wheel is just catching on but I’ve been living mostly in the office sector for three years. All product types (mf, industrial, retail, etc) will suffer with the recession, but office is particularly fucked rn.

Probably correct to be short-term bull, but cracks are forming big time.

The long-term nature of office cre and their leases ensures these issues creep up slowly, but also that they don’t and can’t really go away without a serious intervention.

The media is focusing on smaller banks share of loans backed by cre, which is an issue sure, but in the end that’s not really what matters. What matters is office was overbuilt already, now you have an absurd essentially overnight disappearance of demand that hasn’t healed in three years, and as a result ANY owner with a heavy exposure to office outside the highest quality assets will have trouble covering their debt payments and even if payment isn’t an issue they’re still considering handing the keys back (because why continue to hold an asset with negative leverage).

Google search on your own and you’ll very quickly find multiple recent examples of institutional players wiping their hands clean of office product. You’re not even hearing about the smaller players doing the same, but they are there.

Unless somehow demand suddenly skyrockets and lenders can buy an owners story of a turnaround and growing rents based on that (allowing for some creativity around extensions), keys will continue to be handed back and write downs will accelerate.